Cash Flow Analysis Of Borrower's Repayment Ability

Overview:

There is an old saying in credit analysis, "Borrowers pay back loans from cash flow, not profits." But it is not just cash flow; it is cash flow from operations that is the most desirable source of repayment because it is generated by a borrower managing its working capital assets and earning a sustainable profit.

This webinar will explain the difference between profits and cash flow as well as cash flow from operations vs. cash flow from financing and investing activities. After all, borrowing from another lender or liquidating fixed assets to pay you back ultimately hurts the long-term viability of the borrower.

Why you should Attend:

The webinar will explain how the cash flow statement is derived from the balance sheet and the income statement, and then it will describe its three component cash flow activities-operating, financing, and investing. By the end of the session, you will see how cash flow is incorporated into the analysis and underwriting of a business borrower.

Areas Covered in the Session:

• Upon completion of this webinar, the participant will have a good understanding of how cash flow is calculated and more importantly, how to interpret its meaning. Specific areas that will be covered include:
• An explanation of how Cash Flow Analysis relies on the conversion of an Accrual Basis Financial Statement into a Statement of Cash Flow (or Cash Basis Statement) because loans are repaid with cash and not profits
• Review of the Rules of Cash Flow in determining how much cash is generated from items on the balance sheet
• Global Cash Flow Analysis Methodology utilizing financial statements, tax returns, and credit reports of commercial borrowers and individuals
• Comparison of operating cash flow to the more inaccurate traditional cash flow (profits plus depreciation) and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) method of determining cash flow
• A free cash flow method that can convert EBITDA into operating cash flow

• Speaker will also be talking about:
  • Accounting method: Cash basis vs. Accrual basis: Understanding the differences in the two accounting methods and analyzing their advantages and disadvantages
  • Accrual method: Comprehension of Financial statements prepared on an Accrual Basis and recognizing all economic events regardless of the accumulation of cash at the point of sale or the payment of costs and expenses at the time the costs and expenses are incurred
  • Statement of Cash flows: Shows the cash inflows and cash outflows from operating activities, investing activities, and financing

Who Will Benefit:

• Credit collectors
• Credits analysts
• Controllers and CFOs looking to understand credit and the Decision-Making Process
• Small Business Owners wanting to Learn How lenders look at their Financial Information
• Commercial Lenders and Bankers